Democrats Hitch a Ride on Auto-Industry Rebound

President Obama promoted his clean energy agenda May 6 at an Allison Transmission factory in Indianapolis.
European Pressphoto Agency

By

Sharon Terlep And

Jeff Bennett

Updated May 31, 2011 12:01 a.m. ET

DETROIT—Midwestern auto-industry towns that were hit hard in the recession are becoming an important backdrop for President Barack Obama and other Democrats hoping to use reinvigorated factories to paint a picture of the improving economy ahead of the 2012 elections.

On Friday, Mr. Obama will visit a Chrysler Group LLC plant in Toledo, Ohio, where he will argue that his administration's auto bailout was a success. That visit will follow a string of appearances by Obama officials in recent months at auto-industry plants.

Ohio Democratic Sen. Sherrod Brown, who is up for re-election, said the Democrats campaigning in the Midwest would cite the auto makers' rebound to repel Republican criticism. "Clearly, our loans made a huge difference, and when you ask [the Republicans] about it, they don't have an answer."

The auto industry's rebound poses a challenge for Republicans because many of them argued against using $80 billion in taxpayer dollars to try to save
General Motors
Co.
, Chrysler and many of their suppliers. In 2008, for example, Republican presidential candidate Mitt Romney wrote an opinion article headlined "Let Detroit Go Bankrupt."

ENLARGE

Last week, a spokesman for Mr. Romney, the putative front-runner for the 2012 Republican presidential nomination, said the former Massachusetts governor deserves credit for coming up with the bankruptcy process Mr. Obama implemented at GM and Chrysler, though he didn't believe the government should have provided the financing.

The two auto makers have hired or brought back nearly 15,000 auto workers, with plans to hire 4,000 more, a development the administration is eager to tout. GM and Chrysler also are making money for the first time in a decade, and sales continue to rise as customers return to their brands.

In the past 10 months, the president and top administration officials have made appearances at GM and Chrysler plants in Midwest states important to next year's election.

Mr. Obama's Toledo trip this week will be the fourth time in less than a year that a Chrysler plant has been used as a backdrop by the Obama administration. Ron Bloom, Mr. Obama's top adviser on manufacturing, last week participated in a ceremony acknowledging Chrysler's repayment of its $7.6 billion government loan at the auto maker's Sterling Heights, Mich., assembly plant.

Treasury Secretary Timothy Geithner toured the Jefferson North Assembly plant in Detroit in April and Vice President Joe Biden made a stop at Chrysler's Toledo plant in August 2010. Mr. Obama also visited Chrysler's Jefferson North Assembly plant in Michigan in July, along with visits to Detroit-area GM and
Ford Motor
Co.
factories.

The appearances deliver a prime venue for Mr. Obama and his lieutenants, who are greeted at auto factories by hundreds of cheering auto workers, union leaders, Democratic and sometimes Republican lawmakers and company executives, all praising the rescue decision.

Unlike Mr. Obama's efforts to overhaul health care and manage conflict abroad, the auto industry rescue has become a less-controversial achievement as GM and Chrysler improve and come close to repaying the $60 billion total rescue package.

Chrysler has become a favorite bragging point with the White House. The auto maker repaid its loans using finances raised from a group of banks and $1.3 billion paid by
Fiat
SpA to increase its ownership stake in Chrysler to 46% from 30%. On Friday, Fiat said it plans to buy out the U.S. government's 6% stake in the company, giving it majority control of Chrysler.

GM, meantime, has returned more than $20 billion of the bailout through a direct loan repayment and last year's initial public offering, which priced well above initial expectations, though the company's share price has since fallen.

The White House has even taken some credit for recent success at resurgent Ford, the only Detroit auto maker to avoid bankruptcy and a bailout, arguing that a collapse of GM and Chrysler would have crippled Ford as well.

GOP campaigns are working to turn down the hype, while taking credit for the tough measures GM and Chrysler were forced to accept as part of the bailout. To get the money, Mr. Obama required that Chrysler merge with Fiat to lessen the government exposure to the company. At GM, he ousted then-CEO Rick Wagoner, put new members on the board and forced the company to close brands and factories and accept executive pay limits.

Republican presidential contender Tim Pawlenty on Wednesday blasted the auto bailout as "sweetheart" deal that favored union workers at the expense of shareholders and creditors.

"It was another example of crony capitalism," the former Minnesota governor said. "If you're a big business or bailout business and you've got buddies in big government, big unions, you get the special deal. But if you run the hardware store, run the butcher shop or run the bicycle-repair shop, then you're out of luck."

Mr. Obama's opponents also argue the White House has been too quick to claim success. "In our view they're spiking the football a little early," said Kirsten Kukowski, spokeswoman for the Republican National Committee.

The U.S. Treasury has said it is unlikely to fully recover $1.9 billion still outstanding on the Chrysler rescue. The U.S. would lose around $10 billion if it were to sell its remaining stake in GM today.

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